Paytm Seeks SEBI Nod For Up To Rs 16,600-Crore IPO

One 97 Communications Pvt., parent of online payments platform Paytm, has filed for an initial public offering to raise Rs 16,600 crore in what will be India’s biggest maiden offer.

Paytm’s IPO will surpass Coal India Ltd.’s Rs 15,200-crore issue of 2010. And it comes as the India’s equity markets scale new records and the pandemic has accelerated digital shift, giving internet economy firms the confidence to tap public markets. Zomato Ltd.’s Rs 9,375-crore IPO was fully subscribed on the first day of sale itself.

Paytm has filed a draft red herring prospectus with the Securities and Exchange Board of India.

The issue document includes:

• Rs 8,300 crore in sale of new shares.

• Rs 8,300 crore in offer for sale by existing shareholders.

• Paytm may consider pre-IPO placement of up to Rs 2,000 crore.

The arrangers to the issue include Morgan Stanley, Goldman Sachs, Axis Capital, ICICI Securities, JPMorgan, Citigroup and HDFC Bank.

The offer was approved by One97 Communications’ board on June 14, while the fresh issue of shares was approved by shareholders on July 12. At its annual general meeting held on June 30, the company's shareholders had approved a split of equity shares of Rs 10 each to 10 equity shares of Re 1 each.

The following shareholders are likely to sell part of their holding in the IPO:

• Vijay Shekhar Sharma

• Antfin (Netherlands) Holding

• Alibaba Singapore E-commerce

• Elevation Capital

• SAIF-III Mauritius / SAIF Partners India

• BH International Holdings

Antfin (Netherlands) Holdings BV, part of China’s Ant Group, is the largest shareholder for Paytm, holding 29.6% of the pre-offer paid-up equity share capital. Founder Vijay Shekhar Sharma directly owns 9.6% stake in Paytm.

• According to the prospectus, Rs 4,300 crore worth of proceeds are expected to be used for growing customer base, acquiring more merchants and providing them with more financial services.

• Rs 2,000 crore is estimated to be used for new business initiatives, acquisitions and strategic partnerships.

Paytm, however, did not provide estimates for how much it will spend for general corporate purposes. The amount for general corporate purposes, it said, will be finalised upon determination of the offer price and updated in the prospectus prior to filing with the Registrar of Companies. The amount utilised for general corporate purposes shall not exceed 25% of the net proceeds, it said.

One97 Communications reported a net loss of Rs 1,701 crore in the year ended March 31, lower than Rs 2,942 crore net loss reported a year before. Its net worth fell to Rs 6,535 crore in the last financial year, down 19.4% year-on-year.

Total borrowings rose to Rs 545 crore in FY21, up from Rs 209 crore in FY20.

"We expect to continue to incur net losses for the foreseeable future and we may not achieve or maintain profitability in the future," the prospectus said.

The company expects its operating expenses to increase as it hires additional personnel, expand its operations and infrastructure, both domestically and internationally. The expenses will also rise as it continues to enhance platforms and develop and expand its capabilities, expand the company's products and services, and expand and improve interface, it said in the prospectus.

The net result of these activities is that the company continues to register negative cash flows.

One97 Communications continues to have the widest spread of business across India's payment ecosystem.

• It offers payment services, commerce and cloud services, and financial services to 33.3 crore consumers.

• It has a total merchant base of 2.1 crore.

• It reported a gross merchandise value of Rs 4.33 lakh crore in FY 2021 across platforms.

• Monthly transacting users (MTU) stood at an average of 5.04 crore.

Payments and financial services continue to account for the largest share of revenue.